Health Insurance

A group health plan is an insurance policy to spread the risk and finance medical expenses incurred by a group of individuals.

Many NJ carriers offer Health Maintenance Organization (HMO) plans. With an HMO, you choose a primary care physician (PCP), who directs your medical care and gives you referrals when you need to see specialists. However, modern HMO’s come with a no-referral option, if you’d like to be able to see a specialist without a referral. With an HMO, you must go for medical care within your plan’s network or you won’t be covered (except for Emergencies).

Most carriers also offer Point-Of-Service (POS) and Preferred Provider Organization (PPO) plans, which provide an out-of-network benefit (if you have to see providers who don’t take insurance). In-network, these plans work very similarly to an HMO. For dental plans, an out-of-network benefit is more important, since NJ dentists are more selective about which networks they use.

NJ medical plans can be structured in such a way that they are compatible with Health Savings Accounts (HSA’s). The premium for this type of plan is lower, since the plan has a broad deductible that must be met (except for Preventative care) before the carrier subsidizes claims. Employees can open an HSA (typically at a bank) to put tax-deductible money (e.g. the premium savings and/or an employer-match, if applicable) to cover the plan deductible and other qualified medical, dental and vision expenses. The HSA money belongs to the employee and can carry over from year to year.

Alternatively, some employers will use an HSA-compatible health plan to establish a Health Reimbursement Arrangement (HRA) for their employees (in this case, employees can NOT open HSA’s). The employer will use the premium savings from the health plan to insulate their employees from the plan deductible, by reimbursing qualified employee claims on a tax-preferred basis. If the employees are typically healthy, this can save money for both employer and employees.